An assortment of all things interesting (and possibly useless) in the legal profession

Monday, March 9, 2009

Open Thread: Student Debt Solutions

It's hard to feel optimistic about our country's economic future these days, and it is increasingly apparent that the legal industry is no more immune to America's new reality than anyone else. With the prospects for high paying legal employment (seemingly) dwindling by the day (see AboveTheLaw if you're in the mood to be depressed), it seems evident we need to come up with innovative solutions for dealing with student loan debt. Most law students, after all, have loan debt in excess of $150,000--the repayment of which will begin only a few short months after graduation. How can those of us who graduate without a job, or are deferred (perhaps perpetually) from our start date reasonably be expected to pay off our debt?

One solution I've come across is the "Cancel Student Loan Debt" movement on Facebook. The group, which has already attracted over 100,000 people, advocates canceling student debt to stimulate the economy:

Forgiving student loan debt would have an IMMEDIATE stimulating effect on the economy. Responsible people who did nothing other than pursue a higher education would have hundreds, if not thousands of extra dollars per month to spend, fueling the economy NOW. Those extra dollars being pumped into the economy would have a multiplying effect, unlike many of the provisions of the new stimulus package. As a result, tax revenues would go up, the credit markets will unfreeze and jobs will be created. Consumer spending accounts for over two thirds of the entire U.S. economy and in recent months, consumer spending has declined at alarming, unprecedented rates. Therefore, it stands to reason that the fastest way to revive our ailing economy is to do something drastic to get consumers to spend.

Several major news outlets have already reported on this interesting idea. But surely there are other plausible solutions that could both improve our economic woes and help students who are, regrettably, bound to face student debt struggles.

I disagree and think we need to cancel debt. THe facebook group is exactly correct. We're bailing out failing companies but not real, individual people who need it? Senseless. If Obama wants to earn his keep he'd better get something like this through thte works.

I have student debt, and I hate it as much as the next guy. That said, however, student credit is drying up by the minute. Many international students are unable to attend prestigious U.S. graduate institutions becuase banks will no longer lend to non-residents without a domestic co-signor. If you simply allow debt to be cancelled, no lender will be willing to issue any new loans, bringing a halt to our educational system. If, on the other hand, you propose that "stimulus" money be used to pay-off student debt, then you will simply be moving the debt from an individual to a national basis (by increasing each person's pro rata share of the $10 trillion national debt.

How would cancelling all student debt cause an "influx" of spending into the economy? Sallie Mae is an economic actor, and employs thousands of people. So, if we cancel what we technically OWE them, then they go belly up. Sure, we might have more money to spend on other things in the short run, but this solution is simply "zero-sum." We would only gain their losses, and there would no net economic benefit. This facebook group message is asinine economic policy; but, so is most of the shit the government does.

105k is approximately $45,000 BETTER than 150k in debt. Taking the very rough estimate that for every 1000 borrowed, one can expect $10-15 per month payment (this figure makes a bunch of assumptions that I don't want to get into, but it seems pretty accurate if used in a time-value of money formula), a difference of $45,000 translates to a savings between $450-675 PER MONTH for your payment. That seems like quite a bit to me, but what do I know?

@ 1:16Your comment is balls-to-the-wall spot-on. Every action has a cost-- cancelling our debt will end up f'ing over the creditors who extended us the capital to begin with. When creditors get f'ed over, they stop providing credit (see-- um, every story in the wall street journal since 2007, I guess).

Here's a couple ideas:

(1) Cancel the last year of law school. It's shaping up to be pretty fucking worthless, at least for me. Moreover, I've learned way more in the externships/clerkships I've worked than I have in the class room.

(2) Have the professors get off their asses and custom-create their own textbooks. I've had a couple of professors do this, and not only is the book much better (and significantly cheaper) but the professor actually knows what the hell the author/editor was thinking...because he was him.

(3) Fire the career services department and deduct that expenditure pro rata from our tuition bills.

(3a) If firing the CSD/CSO is impossible, make them do something productive and beneficial to the students... I don't know, like have interesting programs and make a 'mentorship' program that actually fucking works so we have someone to talk to when we're looking for work.

I am a current 2L at GW Law in DC. Is it just me or did tuition increase? I don't remember what I paid for this year, but this website (http://www.law.gwu.edu/ADMISSIONS/TUITION/Pages/default.aspx) says its 42k now.

This is an abomination. I would like someone in the administration to come on and explain this. 60-70% of my classmates are working for FREE this summer, and tons of 3Ls have no jobs or have there jobs deferred. What justification is there to pay this ridiuclous price to go to this school? The profs are great, but I honestly feel like I got jipped.

I don't think this is unique to GW; every school's tuition increases yearly. It's not like you didn't know this when you deposited.

@ Master Shake --

I don't know if scrapping the 3rd year altogether would be advisable, although what W&L is doing (see Nima's earlier posting on this) would be an interesting--perhaps warranted--move that would achieve the same functional results as your proposal.

I agree 100% regarding your custom books suggestion. It is crazy how much we pay for texts in law school. Absolutely insane. I deliberately try to take classes where I can avoid spending $1000 on texts...something needs to be done. Be it custom texts or lowering book prices.

Tamara Devieux-Adams can answer any qs you have about GW average debt (tdadams@law.gwu.edu). Princeton Review also collects this information for their "Best Law Schools" publication. When I was considering applying to law school about 3/4 years ago, average indebtedness at private law schools was about 86-89k. I expect that GW has more debt than average because tuition is fairly high.

I don't know that I would relate the cost of law school to the cost of what a legal degree buys you. That's the decision of the consumer. If it's not an economically rational one, the consumer shouldn't buy.

As we all know, the cost is based on producing a profit. Whatever price we're paying is not how much it costs to provide an education. Maybe we're talking around each other because my economics knowledge is minimal at best.

In any event, I do think the economic crisis has to be a breaking point: something needs to be done--be it eliminating student loans or otherwise--to ensure that this generation of lawyers is able to survive.

I'm going to co-sign with the other Justin. While the idea that this Facebook group is putting forth sounds good its a "something for nothing" proposition. It'd be a boon for all those like myself with student loan debt. However, if you think its hard to get student loans now do you think more lenders would be lining up to give money away, which is what this forgiveness amounts to. I mean what possible incentives would lenders have to give money to borrowers if they know these borrowers will not be paying the money back? If you want a sure fire way to ensure that there are significantly less funds available for students presently or in the future to borrow then enact this plan.

Profit on academics is low, even in the business world it's typically a single-digit percentage. I don't think it's the case if GW converted to a not-for-profit organization it would cost half as much.

What we have to do is create the same problem we have with teachers- no one is willing to get a two year degree for a low-paying job, so the government gives dramatic reimbursements for educational expenses. Luckily, unlike nursing/engineering, etc- legal expertise can't be imported at a lower expense.

The problem is- people pack graduate schools when the economy is bad. Demand is up for the overpriced, prestigious legal/medical/business education. If GW (or any other law school) were operating primarily on a profit motive, now would be the time to charge more rather than less.

But I agree, I'd like to pay less loans. I don't see it happening super soon. Justice Thomas was still paying his Yale loans while on the Supreme Court. We're not the first generation of lawyers to carry a couple decades of loan payments on our backs.

"Let me be clear. This is NOT about a free ride. This is about a new approach to economic stimulus, nothing more. To those who would argue that this proposal would cause the banking system to collapse or make student loans unavailable to future borrowers, please allow me to respond.

I am in no way suggesting that the lending institutions who manage such debts get legislatively shafted by having these assets wiped from their books. The banks and other financial institutions are going to get their money regardless because, in addition to the $700 TARP bailout, more bailout money is coming their way (stay tuned!) - this proposal merely suggests that educated, hardworking Americans who are saddled with student loan debt should get something in return, rather than sending those institutions another enormous blank check. Because the banks are being handed Trillions of dollars anyway, there would be no danger of making funds unavailable to future borrowers.

Many of the vocal nay-sayers who have curiously joined this group seem intent on ignoring the fact that Washington IS going to spend TRILLIONS of dollars, likely in the form of handing blank checks over to more and more banks, as a way of getting the economy under control. Normative assessments of how things should be are fine, but they don't reflect reality.

Accepting the premise that Washington WILL spend Trillions of dollars in unprecedented ways (a good portion of which will just be trial and error, since we're in uncharted waters), what is the argument against directly helping middle class people who are struggling, rather than focusing solely on the banks and other financial institutions responsible for crisis to begin with?

Further accepting that there is an aggregate amount of outstanding student loan debt totaling approximately $550 Billion, (that's Billion with a B, not a T), one is forced to ask again, what is the objection to helping real people with real hardships when all we're talking about is a relative drop in the bucket as compared with what WILL be spent to dig us out of this hole?

In a perfect world, I share these biases towards personal responsibility and having people pay back what they owe and making good on the commitments they've made. But we don't live in a perfect world and the global economy, not just the U.S. economy, is in a downward spiral, the likes of which NOBODY truly knows how to fix.

This proposal will immediately free up money for hardworking, educated Americans, giving them more money in their pockets EVERY MONTH, addressing the very real psychological aspects of the recession as much as the financial ones. Is it the only answer? No, of course not. But could it help millions of hardworking people who struggle every month to get by? Absolutely. Given the current economic climate, as well as the plans to spend Trillions of additional dollars that are in the works, one must wonder what is so objectionable about giving a real helping hand to real people with real struggles."

Everyone should bear some of the burden. Legal education is overpriced, so schools should cut back on tuition. It does not cost all that much to run a law school compared with, say, a medical school. Further, law schools are not providing a good that is worth the price they are charging - they cannot help half of their students find jobs, and until they can they have no business charging $40K per year in tuition.

In order to increase students' probability of getting a job, the ABA should have more rigorous standards for accreditation. I hate to say it, but no student with a 150 LSAT and 3.0 GPA has any business in law school. We could easily educate enough lawyers with 1/2 the number of law schools. That may sound elitist, but graduate education is simply not for everyone no matter how inspired you were by Law and Order reruns.

Lenders should use some of their bailout money to decrease interest rates/defer payments in order to increase the chance that students will actually be ABLE to pay them at some point.

Students should take the amount of debt they are going into seriously rather than assuming that all lawyers do well financially. Face it - they don't, and if you go $150K into debt when your school barely places 10% of grads into jobs paying 6 figure salaries you bear much of the responsibility for taking out that debt. Be realistic. Lenders, likewise, should not be lending to these people - they are bad risks.

Until people take responsibility for this situation at every level - students, schools, lenders, and the government - the problem will never get better.

Loans are not to be "cancelled", they are to be paid off. Freeing the money one would use to pay their loans to be able to spend, which will stimulate the economy. Also, since the loan will be paid off, the bank gets their money, and still will be able to loan to future borrowers.

I agree with the general proposition that tuition costs need to go down; it's not sustainable given the current economic climate, and it is leaving a lot of students in holes they'll never be able to climb out of.

I think, however, we need to be sensitive to the fact that there are a lot of good candidates with lower test scores who would thrive in law school; shutting them out by tightening ABA accreditation (to the extent you suggest) would be a bad idea in my opinion. I do think requiring uniform, accurate statistics regarding job placement would be valuable, and would serve the same aim without being quite so drastic.

@ 4:01--

Thanks for clarifying the idea regarding discharging student debt. Given the objections listed on the Group's website (which I posted above as a comment), I do think a lot of the criticisms are not entirely on point.

"I think, however, we need to be sensitive to the fact that there are a lot of good candidates with lower test scores who would thrive in law school; shutting them out by tightening ABA accreditation (to the extent you suggest) would be a bad idea in my opinion. I do think requiring uniform, accurate statistics regarding job placement would be valuable, and would serve the same aim without being quite so drastic."

I agree that there are plenty of candidates with lower scores that would do well in law school and would make fine lawyers. However, we have to start making fewer lawyers, and we have to start somewhere. If we could come up with a better way than the LSAT to measure success in law school/the legal profession I would be 100% behind it. That would hopefully allow the remaining schools to better select students.

Still, I would rather cut out a few potentially fine lawyers by cutting out half of the law schools than continue to have those schools graduate thousands of students who will not be able to find employment for whatever reason.

Thanks for the clarification Craig. I will say this much though if such a policy is implemented am I going to not partake? No, because at that point it'd be foolish on my part. If the government is going to just be handing money out in that manner at that point I may has well participate as well.

It just strikes me as a rather short sighted notion given that the federal government doesn't have this money itself but has three means I can readily think of coming up with this money to disburse. This means it will either print more money (hello inflation!), sell more treasury bonds (hopefully Japan, China, and Saudi Arabia are still keen on purchasing these), and/or raise taxes (I'm sure it'll be more than just those earning over $250k). These are also the reasons why I am not a fan at all of all these stimulus and bailout plans because of the manner with which they will derive funding.

That being said I honestly feel for people who are under crushing student loan debt. At the same time I'm certain nobody forced anybody to go to law school. I know I certainly was not and I carefully weighed my options with financial debt being the largest in my decision on where to ultimately enroll. In my view it this is another example of the over-leveraged mentality and culture that is the primary reason for this current economic malaise. In the long run perhaps this experience will help us in the United States realize that we shouldn't try to "make it rain" if we don't have the money. I also understand that borrowing for education is vastly different than borrowing so you can live it up on the credit card. That being said like everything in life it is subject to risks. Education is just usually a much lower risk investment than other things.

Also, regarding the objective of the facebook group. If they wanted to be truly effective they'd organize in a manner where they'd effectively lobby Congress as that's the entity these days that is really calling the shots in regards to who gets the money the government is determined to hand out. I think there efforts wouldn't be that successful though given what I'm sure are very entrenched and organized student loan company lobbying interests.

One last item, I'm glad to see you all have a blog with serious debate and insightful posts. Keep up the good work!

Thanks for more fully articulating your views; I agree we need to do something, but I still don't think I'd be comfortable tightening ABA standards (thereby preventing people who want to be lawyers from going to law school). True, it may be a foolish choice to go to law school in some instances. But, as long as the information that is accessible is accurate (which, as 4:46 correctly notes, it currently is not) I think we should let people choose for themselves.

@ Justin D--

I think you make some great points. I'd like to hear someone who has more of a stake in the "cancel debt" plan being discussed address your arguments.

Glad you enjoy the blog, of course, and I hope you'll keep coming back.

@ 4:46 --

You highlight one of the biggest problems. Another big problem, the solution of which we're seeking, is making law school--any law school--worthwhile in the context of revoked offers, and volatile (at best) employment prospects.

As the creator of the Facebook group in question, I came here to rebuff some of the typical criticisms that I was certain would arise when Craig told me that he had started this discussion. After reading through the comments, however, it would seem that Craig has done a great job of clarifying the intent, as well as the logistics of the proposal. "Cancel" was a poor choice of words when I started the group, however, it's too late now to change it - I've received too much publicity about the group. The proposal suggests that the banks and other lending institutions would receive the money they're owed (up front, as opposed to over the course of 25+ years) and, therefore, the plan would help the banks and lending institutions just as much as the borrowers. In today's economic climate, I'm fairly certain that Sallie Mae and Citibank wouldn't mind receiving their chunk of outstanding student loan debt right now.

As a student with tons of debt, I love your plan and as an American who wants to see this country escape this economic disaster, I like it even more.

It perplexes me why people criticize this so much but seem to have accepted, with little reservation, the fact that we're spending the money we are to bail out these irresponsible companies. It defies logic.

New ideas take time to take hold, but in the 5 weeks since I started the group, it's attracted over 111,000 members, not to mention a significant amount of press - so the idea is now out in the ether. If you think about it, this idea is no more crazy than what has already been done or what Washington is prepared to do to bail us out of this hole.

Rob's proposal is certainly appealing. I don't know much about economic theory, but the proposal seems, on its face, no less feasible than the government's current "plan."

Its ability to immediately stimulate the economy has been discussed here, with varying views about whether it would be effective. But, not as much has been discussed about the proposal's effect on the nation's long term health (whether it be economic, political, medical, environmental, etc). With the decreased job prospects, the current core of students will undoubtedly be stuck deeper in debt than ever. What effect will this have on this nation's brightest young individuals? It's said that grad school enrollment increases in poor economies- but the current economic recession/depression is much more extreme than we've seen before. If grad students keep coming out of school with enormous amounts of debt and no job prospects, I don't think we can realistically continue to expect grad school enrollment to rise (in fact, I think it would eventually decrease significantly).

Will the nation's future law makers be turned off from attending law school? Will the brightest young minds look elsewhere? This "canceling" of student debt guarantees that the this nation's bright, conscientious, and driven young individuals aren't so overwhelmed with debt that they are unable to contribute to greater society.

What about all of the responsible students who did not take out loans and paid their own way through law school? This plan makes law school essentially free for those who took out loans, and penalizes those who didn't take out loans. If I thought all my loans would be canceled, I certainly would have taken out loans & not paid out of my family's assets.

I'm not the founder of the group, but let me guess what Rob would (quite correctly, in my opinion) say:

We're going to be "giving away" money anyway with the purpose of bettering society on a collective, aggregate level. You're being no more cheated than you are with the current bailout plan; further, if conditions are put on money given to cancel student loans, you'd still be in a better position than those who had their loans "canceled."

By the way, it looks like the movement was picked up by ATL: http://abovethelaw.com/2009/03/student_loan_bailout_just_do_i.php#more. Way to go, Rob! This has really picked up some steam.

Thanks, James. I appreciate your attempt at giving me due credit, however, I agree with Anonymous 4:42 in that the main goal is to get this idea out into the mainstream dialogue and, hopefully, make it a reality. Though I'd be lying if I said that I didn't notice that, too!

The thing about the piece on ATL that annoys me a little is that it reads like a tongue-in-cheek plea for a bailout whereas what I've proposed is a serious alternative to economic stimulus. Yes, paying off my student loans is a burden, but I do it, despite the usarious nature of the loans. The main point of what I've proposed is a bottom-up approach to rebuilding the economy, not simply a handout. Don't get me wrong, I'm well aware of the gross disparities between student loan debt and all other types of debt in terms of consumer protections and that's something that's going to have to be addressed. I also think that we're reaching a tipping point where the default rate is going to explode as more and more jobs disappear. The nay-sayers who preach about personal responsiblity and such just don't get it - Washington is spending trillions of dollars to try and dig us out of this hole - the choice, therefore, is who to give that money to? The banks and other financial institutions that are responsible for the mess in the first place, or hardworking, educated, middle-class people who took out these loans based upon certain assumptions about the job market and the economy that have all been proven false? The choice seems obvious to me.

I agree that ATL's depiction made this sound like a whiny student's plea to his/her mother which is really unfair, and disappointing. At least the other news outlets have accorded more legit treatment.

Yes, Bobbyapples=Rob. . .didn't realize I was signed in under my alter ego. . .sorry for the confusion.

This is how I would (and have) responded to such comments: Nothing in a democracy is fair. There are those who benefit and those who don't. I don't have kids, yet my tax dollars go towards public schools. I'm not on Social Security (and it probably won't exist when I'm old enough to be eligible for it), yet I pay FICA taxes. And I've always played by the rules and had no part in destroying the economy, yet my tax dollars went towards the $700 Billion TARP program. What's fair about any of that? If fairness were the benchmark for anything the government tried to do, nothing would ever get done. The simple fact of the matter is: not everyone would directly benefit under the terms of my proposal, however, if it were ever implemented and actually worked as I think it would, EVERYONE benefits. I think that people who were fortunate enough to have families pay their way through school should heed Joe Biden's advice - it's time to be patriotic!

If you have $150k in debt for law school you are a complete fool and deserve to part with your money (you know the adage). I graduated with 80k in debt, because I got a small scholarship, saved for two years prior to law school, lived frugally, despite going to a private law school. I have now paid off have my debt less than 2 years later.

FYI – you do not have a right to higher education, cable television (let alone a flat screen TV), vacations, eating out, owning an expensive car. Stop acting like you have a right to these things and start working your ass off. If it does not make financial sense for you to get a degree from a certain school, don't go.

Wow, a lot has happened here since I last checked in... let me address some of what's been said.

@ Rob/Bobbyapples--

Thank you, again, for coming here to share your thoughts on your proposal with all of us. We're most appreciative, and hope you'll continue checking in.

I think your response to 10:46 makes good sense; if we're going to spend the money anyway, why not consider alternative means that may be better for the average American family?

@ 6:37--

You said: "If you have $150k in debt for law school you are a complete fool and deserve to part with your money (you know the adage). I graduated with 80k in debt, because I got a small scholarship, saved for two years prior to law school, lived frugally, despite going to a private law school. I have now paid off have my debt less than 2 years later."

I'm happy you were able to so successfully manage your debt load, but I think it's incorrect to presume that one would be living "high on the hog" to have a debt load of 150k. First, not everyone gets scholarships. Second, some people carry undergraduate debt with them into law school. Third, law school is very, very expensive. My school costs 44k/year. Multiply that by three, you've got nearly 150k right there. And that's not including cost of living expenses. I think 150k is a *modest* debt load for most law students who are not on scholarship--and *most* are not.

@ 6:40--

Interesting point, but please refrain from name calling. Like you, Rob is entitled to his views and he's no more foolish than you are for believing them.

Personally, I don't see what the problem is with requiring loan cancellation recipients to pay back interest; this would, in my view, be a logical thing to require. It would also be logical to throw conditions in the mix. The government could have interest for repayment scaled to a level that corresponded to the student's salary/job status.

Craig Reiser: "First, not everyone gets scholarships. Second, some people carry undergraduate debt with them into law school. Third, law school is very, very expensive. My school costs 44k/year. Multiply that by three, you've got nearly 150k right there. And that's not including cost of living expenses. I think 150k is a *modest* debt load for most law students who are not on scholarship--and *most* are not."

Not everyone should get a JD, MD, PHD, Masters, or even college degree for that matter. It does not make sense for some people to get those degrees and their time is better spent on other endeavors (read Adam Smith). 95% of all law degrees are not worth 150k. You should have realized this and not taken that much debt to go to law school. The American public is not here to bail you out of your dumb decisions (I do not agree with the AIG or auto bailout either). Guess what happens if people realize that law school is not worth 150k and less people go to law school? The price of law school will stabilize or go down (again read Adam Smith). Problem would be solved without the American people bailing you out. Guess what happens if the American people bail you out? The price of tuition will continue to increase.

First, I want to clarify that I do not regret going to law school. Regardless of my debt situation--which, frankly, I'm not overly concerned about--I believe it was a wise decision for me. I enjoy the law, am very excited about my upcoming summer job, and look forward to a long, fruitful legal career.

Second, I think your argument inappropriately assumes throughout that a debt cancellation plan of the sort Rob proposes is solely for the benefit of the students who should not have incurred the debt in the first instance. This is not the case. The benefits this plan would bestow on students are incidental to the larger scheme and purpose: fixing our economic calamity.

That said, I think there's a lot of merit to your point that high tuition is a product of demand which probably shouldn't be as high as it is. I hope others will expand on your thoughts in this regard, because our profession is, to a large extent, over saturated; there's a lot of truth to this.

"The benefits this plan would bestow on students are incidental to the larger scheme and purpose: fixing our economic calamity." I don't understand how paying off your loans and requiring the rest of the country to incur more debt as a result would fix our economic calamity. You already have shown you do not know how to properly spend your money, why should I think you will do a better job this time? If your argument is that more cash would encourage more purchasing thereby spurring on the economy then I think we should distribute any such cash equally across the citizenry. That way we won't be rewarding a class of individuals who made a poor investment.

1) Where have I "shown [that I] do not know how to properly spend your money[?]" Not that this (even remotely) bears on the point at hand, but--just to clarify--this is not, in fact, the case.

2) You said "[i]f your argument is that more cash would encourage more purchasing thereby spurring on the economy then I think we should distribute any such cash equally across the citizenry. That way we won't be rewarding a class of individuals who made a poor investment."

I think this is an equally viable solution. The point Rob's Facebook Group has repeatedly made is that, since we're going to be bailing out irresponsible investors anyway, we might as well bail out those with professional or college degrees since it will lead to more of a long-term benefit. I'll let him clarify above and beyond that.

Though I'm not sure, I'd guess he'd respond to your point about equal distributions by noting that students with college, graduate or professional debt are better positioned than the general public to stimulate the economy with the savings. His mission statement does state, however, that this suggestion is not the only one worth pursuing--rather, that it's as good a solution as any.

1. Anon (at 1:42): I don't think Craig is arguing for the proposition that actually "bailing" students who have got into massive debt is good economic policy. Correct me if I am wrong, Craig, but he is merely pointing out that, in a broad sense, this policy is really no different than what is already occurring with the continuous government bailouts of industry, mortgage owners, and every other economic actor who has made bad decisions.

2. A better critique of this (and any such proposal) is that bailouts in general create moral hazard (for a humorous example of this, see the various e-mails telling you how to take advantage of "free" government money), and are thus bad policy (more on this in point three). In a free market economy, people will respond to incentives presented to them, and will jump (quite rationally) at the opportunity to take government money--regardless of whether they are able to sustain the correlative consequences of doing so. So, in this sense, I totally agree with you that this proposal is a bad idea; but so is any bailout.

3. Regarding the "stimulating effect" argument, I think Anon 1:16 (on March 10) has it right. In the short run, bailouts amount to quintessential zero sum games; when the government bails someone out, it necessarily takes the resources from someone else. There is no new economic wealth being created in this cycle. We can argue whether the deadweight losses created amount to good policy in the long run, but I just fail to see how that can be possible.

I love it when people spout one economic theory over and over again, yet ignore other basic economic principles that don't support their ideology. Quote Adam Smith all you want - it misses the point entirely. The point of student loan forgiveness, as I see it, is to stimulate the economy, NOT to bail-out students who made certain personal decisions about debt, whether good or bad.

Economic stimulus is NOT a zero-sum game. PLEASE look up the basic economic principle of the multiplier effect. Without an understanding of that basic concept, you can never understand what an economic stimulus is, nor what it is designed to accomplish.

Consumer spending accounts for over 2/3 of the entire U.S. economy. Consumers aren't spending. Therefore, the government has to. The government can spend that money in any number of ways - they can do what they've always done - give it to the banks and other institutions of greed responsible for the mess we're in, or they can try a different approach by giving it to people to spend. That can be accomplished through tax cuts, however, as I said on my group, one-time tax rebates usually go to paying off debt or to savings, having no multiplier effect. Payroll tax cuts may have a slight effect in the aggregate, but on the individual level, who is really going to benefit from an extra $44 per month? Seriously? Who?

Under my proposal, the banks and other lending institutions will get paid anyway - they just don't get a blank check - they get their money on behalf of the student loan borrowers- up front, not over the course of 25+ years. Given their liquidity problems, I don't see why the banks would be averse to this idea.

Reasonable minds can disagree, but try not to let ideology cloud your assessment of reality. I have ideas about how things SHOULD be too, but they're not always the right approach in any given situation. Today's economic climate is completely new territory. Old approaches to new problems are bound to fail.

Nima Mohebbi: "Students with college, graduate or professional debt are better positioned than the general public to stimulate the economy with the savings."

Why? While I would agree that those with a high level of education are more likely to stimulate the economy than those without much education, I would argue that there mere fact that a large class of student debt holders need to be bailed out demonstrates that their degrees are not valued in the economy at large. The student debt holders that need to be bailed out are generally those that went to less competitive schools or obtained degrees that are not in demand. Such education does not significantly stimulate the economy. I do not feel the need to encourage it through public funding. Sorry you made a poor decision. Time to live with it.

I assume you think the asnwer to all economic problems is more debt. That is what you thought when you went to school and decided to take out an amount that you now can't pay back and it what you think now that the economy is in trouble. The only difference is that this time you want the American public to take your debt.

There are a lot of ways to stimulate the eonomy. Debt is not always the answer. Anyone see what the Chinese (holders of $1 trillion of our debt) had to say today about our current debt situation, "Troubling." Yeah, war with China! And you thought Iraq was difficult.

Rob: Your answer on the multiplier effect is correct if I accept your (implicit) premise that Keynesian Economic assumptions are "basic principles." I do not. For good measure, there are plenty of free market economists (see http://www.mises.org) who would fervently disagree with your points--as do I. This does not mean that I don't think that they have merit.

You were, I think, referring to me. I think we're talking past each other: I said you made a good point there, and attempted to put forth a justification. Ultimately, I agree with you that your point has a lot of merit. And, again, I'm not discussing this in the context of being disappointed with any type of personal decision I've made; this is about fixing our economic woes.

Anonymous 5:10 - Who said I can't pay back my debts? I have never defaulted on my student loans and have no intention of ever doing so. I state again: the purpose of the proposal is an alternative means of economic stimulus, not a bailout.